NSPE's Gateway to Private Practice April 2012 
 

Letter from PEPP Chair, Andrea N Martinez-Graves, P.E.

As I sit down to type up my report, I cannot believe that it is already April. Spring is already here and changes are underway. PEPP continues to make strides to streamline the organization in order to improve communication among our states and provide better service to our members. My goal is to have all of these changes finalized before the Annual Meeting in July. And speaking of the Annual Meeting, have you made plans to join us in San Diego? The PEPP Executive Board will be meeting the afternoon of Friday, July 13 to help set the goals for the upcoming year. The day will end with the annual PEPP dinner where the PEPP awards will be presented and I will officially become the PEPP Past Chair and Dawn Edgell, P.E., takes the reigns. Have you turned in your nomination for a PEPP Award yet? You’ve still got until April 30 to turn in your nominations. For more information, go to http://www.nspe.org/InterestGroups/PEPP/Resources/Awards/index.html.

On a brief side note, I’d like to congratulate our PEPP Past Chair Mark Davy, P.E. We’ve just received word that Mark has been selected to become a NSPE Fellow. In receiving this honor, Mark and his father (Michael) will be the first father and son to both become NSPE Fellows. Congratulations to both Mark and Michael who have been such strong supporters of both NSPE and PEPP.

In continuing with the promise I made to bring you more information on how the PEPP organization is working to help you, the committee I would like to highlight this month is PLC. PLC stands for Professional Liability Committee. PEPP’s Professional Liability Committee is a very active, robust group with some of PEPP’s most experienced members and leaders at the helm.

Each year PEPP’s Professional Liability Committee, in conjunction with the risk management committees of the American Institute of Architects and the American Council of Engineering Companies, conducts a survey and face-to-face interviews with representatives of insurance companies serving the A/E professional liability insurance market. The purpose of this activity is to identify carriers that meet the professional liability and risk management needs of design professionals and to gain general information about insurance trends. The PLC also annually assembles the Directory of Professional Liability Insurance Carriers.

The PLC oversees NSPE’s Commended Professional Liability Insurance Program as well as develops resources to assist professional engineers and engineering firms in managing many of the risks associated with engineering practice including the following:

Document Retention Policy (Word document) - This provides professional engineers and engineering firms with a draft in-house policy statement for the retention of documents with full consideration of the types of records to retain, document retention schedule, and document destruction issues.

Document Retention Guidelines (PDF) - This provides commentary based upon the results of a national survey of professional engineers and engineering firms on their in-house document retention procedures.


Professional Liability/Risk Management: Fast-Tracked Project Risks

Budgeting/Design Contingencies

On a fast-track project, the engineer is required to make design decisions before all project information is available. These decisions may turn out to be inconsistent with other aspects of the work or the client’s requirements (which may not have been fully developed at the time the original decision was made), therefore causing additional costs and delays to the project. Both the client and contractor should be aware of these risks and the contract for both the design services and the construction should accommodate the use of contingency allowances.

Enhanced Collaboration

Early contractor participation and extensive communication between the client, contractor, and engineer are key to successful completion of fast-track projects. Some of the key requirements for success in fast-track projects are joint engineer and contractor review of design drawings, quick response times by all the parties (client, engineer, contractor), and the need for subsequent revisions to the established work plan due to changed conditions or new information. It is essential that the enhanced collaboration requirements be reflected in both the professional services agreements and the construction contracts.

Protection Against Client Claims

As a consequence of the above-described disadvantages, fast-track construction often results in an increased risk of claims and liability. The mitigation of this risk requires realistic client expectations, effective project management, and a willingness by each project participant to work together to find timely solutions. In addition, it is advisable to include language in the professional services contract that specifically acknowledges the benefits and risks associated with fast-track scheduling.

Many design firms go beyond acknowledging the benefits and risks to a more protective limitation of liability and indemnification provision. For instance, in many situations legal counsel to a design firm might suggest language such as the following:

Client desires that Project be designed and constructed on a fast-track basis, i.e., that construction commences prior to the completion of all relevant Construction Documents. Client acknowledges that while the fast-track process may provide benefits, such as earlier project occupancy, it also involves additional risk, including but not limited to the Client’s incurring of costs for Consultant to coordinate and redesign portions of Project affected by procuring or installing elements of Project prior to the completion of all relevant Construction Documents and costs for Contractor to remove and replace previously installed Work. In consideration of the benefits to Client in employing the fast-track process, and in recognition of the inherent risk associated with the fast-track process to Consultant, and notwithstanding anything to the contrary contained herein, Client agrees to waive all claims against Consultant for design changes and modifications of portions of the work constructed, together with any associated delays, due to Client’s decision to employ the fast-track process.

Accelerated design and construction can provide significant benefits to a client in terms of putting a capital asset in place. Reduced loan costs, a faster return on the investment, and accommodating an urgent need can all be attained through a fast-track design and construction process. However, a client should acknowledge the increased level of design services fast-track projects demand, and compensate the design team for those services. Changes are endemic to accelerated design and construction, and the client should establish a contingency for those changes. Professional and construction contracts should be modified through the assistance of legal counsel to recognize and limit the risks intrinsic to the project delivery system.

© 2011, Victor O. Schinnerer & Co. Inc. Statements concerning legal matters should be understood to be general observations based solely on our experience as risk consultants and may not be relied upon as legal advice, which we are not authorized to provide. All such matters should be reviewed with a qualified advisor. Victor O. Schinnerer & Co. Inc. is managing underwriter for the Schinnerer and CNA Professional Liability Insurance Program, commended by NSPE/PEPP since 1957. [ return to top ]


Happenings on the Hill

NSPE cosponsored the 2012 Engineering Public Policy Symposium, which was held in conjunction with the National Academy of Engineering Convocation and the American Association of Engineering Societies Awards. Entitled "Outlook for Federal Funding of Research and Development," the symposium featured remarks by White House Office of Science and Technology Policy Director John Holdren, National Institute of Standards and Technology Director Patrick Gallagher, Acting Under Secretary of Energy Arun Majumdar, Reps. Judy Biggert (R-IL-13) and Rush Holt (D-NJ-12), and National Science Foundation Engineering Directorate Deputy Assistant Director Kesh Narayanan. NSPE President Christopher M. Stone, P.E., F.NSPE, F.ASCE, LEED AP, Past President Kathryn Gray, P.E., F.NSPE, member Harve Hnatiuk, P.E., F.NSPE, and Executive Director Larry Jacobson attended the event.

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The Hidden Risks of Green Buildings: Why Moisture & Mold Problems are Likely
J. David Odom, ASHRAE; Richard Scott, AIA, NCARB, LEED AP; and George H. DuBose, CGC

The great irony of building green is that the very concepts intended to enhance a building’s performance over its entire lifetime are many of the same things that make a building highly susceptible to moisture and mold problems during its first few years of operation.

 


While green buildings have many positive benefits, there is also strong evidence to suggest a direct correlation between new products / innovative design and building failures. Simply put, departing from the “tried and true” often means increasing the risk of building failure.

Two strong characteristics of most green buildings are: 1) the use of innovative, locally-produced products and 2) the implementation of new design, construction, and operation approaches that are intended to reduce energy usage and be environmentally sound.

The preceding graphic summarizes some of the differences between green buildings and the concepts the authors have found in lower-risk buildings. For example, lower-risk buildings do not exceed industry guidelines on mechanically introduced outside air; but emphasize humidity control (especially in more humid climates). Green buildings, on the other hand, reward the introduction of more outside air than current industry standards, which can lead to indoor humidity problems and mold growth.

The intent of building green is unquestionably noble and good, and should be aggressively pursued. However, because of the dramatic change that this will present to the design and construction industry, its implementation will present new risks that are likely to be both legal and technical in nature.

Some of the legal risks are fairly obvious, such as the risk of not meeting a building owner’s expectation of achieving a certain level of LEED® certification (i.e., implied or even written warranties). Other risks are more obscure, such as:

  • Accepting the higher standard of care that a green building might present—what is currently considered “best practices” may now become the new expected “standard of care.” Most insurance companies exclude anything that exceeds the normal standard of care.
  • Failing to recognize (or prepare for) the unknowns in cost and schedule impacts that a green building might present.
  • The failure of new products to meet their promoted performance levels, which is more likely with new materials compared to proven materials found in traditional buildings.


Open-celled foam insulation such as the above photograph depicts (especially materials that are bio-based) is being heavily promoted as green products and is often described as hydrophobic. The fact is that most of them are highly moisture absorbent. This is demonstrated in a crude experiment which shows the amount of water absorbed over a short period of time. These materials have a high potential for hiding moisture problems and decreasing the drying potential of envelope cavities—both potentially severe problems in buildings.

Examples of Technical Risks for Contractors & Designers 


Moisture intrusion, whether bulk water intrusion through the building envelope or a relative humidity increase due to the heating, ventilating, and air conditioning (HVAC) system, results in a large percentage of construction claims in the United States. Sustainable building practices, some of which are part of the LEED® accreditation process, can increase the potential for moisture intrusion if not carefully considered and implemented. Examples include:

  • Vegetative roofs, which are more risky than conventional roofs (due to the constantly wet conditions) and must be carefully designed, constructed, and monitored after construction.
  • Improved energy performance through increased insulation and the use of new materials, which may change the dew point location in walls, resulting in damaging condensation and a reduced drying potential for wall assemblies. Lower-risk buildings emphasize the drying potential of the envelope over increased insulation.
  • Reuse of existing buildings or recycled components, which may not be easily integrated to the adjacent new materials and could cause compatibility problems between these materials.
  • Use of new green construction materials that have not been field-tested over time. The designer needs to assess new materials and their risks compared to traditional materials found in lower-risk buildings.
  • Increased ventilation to meet indoor air quality (IAQ) goals that may unintentionally result in increased interior humidity levels in hot, humid climates.
  • Building startup procedures, such as “building flush out,” which could result in increased humidity levels and mold growth. Lower-risk buildings rely almost exclusively on source control (which is also a green-building goal) rather than relying on “flush-out” and increased building exhaust.


New green construction materials are entering the market at a staggering rate. Because many of these products help to achieve multiple LEED® credits, designers working on green buildings are eager to specify these materials. The risk to contractors is that many of these new items are not time-tested, and designers often do not have the time to fully research their efficacy. If the new product fails, it may be difficult to determine if it is a design error, an installation error, or a product defect. Additionally, contractors must rely on subcontractors to install new materials that they are inexperienced in installing.


Conclusions 

“There’s one sure way to kill an idea: Sue it to death.”
Quote from ENR, July 2008

What is the greatest risk to the green building movement? It’s likely not the increased costs associated with green buildings—it’s more likely green buildings that don’t perform up to expectations and, in some cases, may experience significant failures.

The increased costs of litigation and insurance that could result from under-performing green buildings will be absorbed by designers and contractors (in a highly competitive marketplace). However, most likely these costs will be passed onto building owners in the form of change orders.

Only recently has the marketplace begun to recognize the various contractual, legal, and technical risks that are inherent to green buildings. A growing number of experts have suggested that the first two steps to improved green building risk management are to: 1) Recognize the unique risks for green buildings, and 2) develop a set of guidelines that merge the unique regional challenges with green building guidelines, recognizing the lessons learned in lower-risk buildings.

The design and construction community must not assume that if you build green then you will automatically be building regionally correct or even a lower-risk building. Until the gaps between lower-risk buildings and green buildings are addressed, the design and construction community would be advised to prioritize the already learned lessons of lower-risk buildings of the waterproofing, humidity control, and building forensics community. Without these priorities, poorly functioning green buildings are the likely result, and this could be the ultimate killer for the green building movement, especially in demanding climates.

Liberty Building Forensics Group, LLC (www.libertybuilding.com) is a firm that specializes in forensic building investigations and expert witness/litigation support. Its staff has led the correction and cost recovery for some of the largest building failures in the country, including the $60 million defect claims at Hilton Hawaiian Village in Honolulu and the $20 million Martin County Courthouse problems. Its staff has performed green building-related services on over $3 billion in new construction since the late 1990’s and has authored three manuals and over 100 technical publications.

©2009 Liberty Building Forensics Group

The entire technical article that served as the basis for this condensed version can be found in a PDF here, along with references. 
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Educate Yourself with NSPE Online Web Seminars

With just one Web seminar left this spring, don't miss out!

Engineering Ethics: A Conversation About Business, Employment, and Licensure Issues

Join NSPE Deputy Executive Director and General Counsel Arthur Schwartz and a panel of engineering ethics experts for a discussion on the signing and sealing of a subcontractor’s calculations, a Canadian firm’s noncompliance with engineering licensure laws, obtaining professional references, and an employee’s awareness of his employer’s financial improprieties. Polling questions and a Q&A will allow opportunities for audience interaction. 1 PDH
May 16, 12:30–1:30 p.m. (E.S.T.)

Visit the NSPE Web site to register today. [ return to top ]

 

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PEPP 2011-12
Executive Board

Andrea Martinez-Graves
Chair
Tampa, FL

Dawn Edgell
Chair Elect
Aurora, IL

Mark Davy
Past Chair
La Crosse, WI

Eric West
Secretary
Midland, TX

Aaron Thrush
Maumee, OH

Charlotte Anne Maddox
Vice Chair
Tampa, FL

Chris Richard
Vice Chair
Lafayette, LA

Karen Stelling
Vice Chair
Kansas City, MO

 


 


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